AND NOW, THE HARD PART

It was one of NBD Bank's biggest deals last year: a $300-million debt refinancing for a longtime Tennessee customer, Noranda Aluminum Inc.

The Detroit-based bank scored the lucrative role of "agent," or lead lender, in the transaction, a job it claimed in fewer than 30 large corporate deals last year.

But a big deal for NBD is merely routine for its merger partner, Chicago's First National Bank, which managed 150 such loan arrangements in 1995. First was the seventh-ranking U.S. bank in loan syndications, taking the lead in transactions worth $48.8 billion vs. NBD's $4 billion.

Therein lies a huge cultural divide in the two banks' complex merger.

NBD's homegrown executives, among the industry's shrewdest bankers to small and medium-sized companies, dominate the merged bank's top management. Yet they're novices in the world of large loans and sophisticated finance, where First made its name-and where the new First Chicago NBD Corp. plans to reap 25% of its profits.

Position at risk

Unless NBD executives quickly get comfortable playing banker to the Fortune 1000, they could let First's standing as the Midwest's leading corporate bank slip away to more aggressive national rivals.

"You look at NBD being at the smaller end of large corporate; you look at First Chicago being much more global," observes analyst Frank DeSantis Jr. of New York's Donaldson Lufkin & Jenrette.

"I wonder," he muses, "how they're going to mesh those two different cultures."

The course will be set largely by NBD's former chief financial officer, Philip Jones, 52. A self-described "old credit guy," he's in charge of merging the corporate banking groups and bringing NBD-style discipline and conservatism to large deals.

Steeped in NBD's cautious loan doctrine, Mr. Jones joined the bank in 1967 as a credit trainee and rose to chief credit officer by 1992. Perhaps his toughest test came in the late 1980s, when, as head of U.S. commercial lending, he resisted the leveraged-buyout craze that mangled many other banks' portfolios-including First's.

"Most swords have two edges," Mr. Jones says. "The trick is to find that balance between risk and opportunity that makes sense."

Competitors laud NBD's squeaky-clean credit record. Indeed, if risk were scotch, First would run the cocktail party circuit and be prone to occasional binges. NBD would be a teetotaler.

"They'll turn down a deal that another Michigan bank might have made," says John Canepa, recently retired chairman of Old Kent Financial Corp. in Grand Rapids, Mich., now a consultant with Indiana-based accounting firm Crowe Chizek & Co.

On the other hand, Mr. Canepa adds, NBD sometimes will make a loan another bank wouldn't-but with vigilant terms.

Investors, debt-rating agencies and stock analysts like the prospect of a prudent driver at the merged bank's wheel. Stricter oversight, they hope, will prevent First from periodically veering into losing bets, as it did in the 1980s with developing-nation debt and speculative real estate loans.

Favorable assessment

In a favorable rating of First NBD's recent $2-billion shelf registration, Chicago's Duff & Phelps Credit Rating Co. cited confidence that "the new entity will be able to quickly implement a conservative credit culture."

Some First Chicago bankers worry privately that the size of deals, or interest in certain industries, will be curtailed under the new regime.

Already, a committee system has been adopted to approve loans exceeding a certain size and risk level. (The trigger point is still being worked out.)

First had abandoned that approach several years ago in favor of a less cumbersome process requiring a senior executive's signature. At the merged bank, eight executives, led by Mr. Jones, will review the biggest loans.

The obvious risk is that too many loans may get held up for review, while aggressive competitors, such as Bank of America Illinois, Citibank and NationsBank, vie for customers' business.

They'll have to be. The corporate bank aims to generate 25% of First NBD's profits-more than any other segment. While lending often isn't the most profitable part of a bank's relationships with large corporations, it opens the door to selling higher-margin services, such as foreign exchange, derivatives trading and cash management.

"You do have to be involved in the credits to get some of these other ancillary services," says Joe Duwan, analyst with Keefe Bruyette & Woods Inc. in New York.

Mr. Jones says he's not squeamish about big deals. As far as syndicating loans, "First Chicago did more of it than NBD did," he acknowledges. "But it's in no way foreign to anybody."

Intermingling staffs

He argues that the banks are more alike than different in their ambitions and lending philosophies. To mix the cultures, the company is intermingling First and NBD staffers.

First banker Robert Patterson will move to Detroit to run the "mid-corporate" business, a new category that includes customers with annual sales between $150 million and $1 billion.

On the flip side, NBD's Nick Preda, who's dealt with the Detroit bank's larger customers, will work from Chicago, handling customers with sales exceeding $1 billion. He'll also oversee business in such specialty industries as utilities, energy and communications.

Other people are being retained for their obvious niche strengths. First's Jacqueline Hurlbutt will remain in charge of syndications. Gerald Byrne, also of First, will run the merged bank's securities subsidiary. NBD's Thomas McDowell is chief of credit policy, a position he held at NBD.

In a nod to First's way of doing large deals, NBD bankers will see at least one major change. They've been stripped of their loan authority-much as First bankers were five years ago-and divided into marketing and credit functions, to avoid conflicts of interest when judging the soundness of a deal.

No wholesale changes

As far as product offerings and lending activity, Mr. Jones says, "We're not making any wholesale changes."

Still, he's not ruling out future revisions.

First shut down its New York-based emerging-markets trading operation-which lost $47 million in 1994-shortly after the merger plan was announced last July. The decision was independent of NBD, Mr. Jones says. Might other operations deemed risky be scaled back? "It's too early to say," he says.

Douglas Penn, an analyst with Minneapolis-based American Express Financial Advisors Inc., a large investor in First NBD, says he expects NBD to embrace First's derivatives and risk management strength.

"It's just a fact that commercial banks like NBD need that," he says. "Their customers are getting more sophisticated."

While NBD should exert its conservative influence over lending at the combined bank, Mr. Penn says, First has considerable skill in assessing other components of risk.

"They have a much wider idea of what exposure is," he says. " It's a different mind-set than NBD."